Industry at a glance

In September, Saudi Arabia and Russia produced approximately 9 MMbopd each, as both countries continued to honor their 1 MMbopd supply reduction pledge, despite a 2.3 MMbopd increase in global demand led by China, India and Brazil. The downward pressure on inventory caused benchmark crude prices to surge, with Brent up 8.8% to $93.72/bbl, with WTI jumping 10% to average $89.43/bbl in September. This is the second consecutive month both global benchmarks experience a significant price increase (Brent +7.5%; WTI +7% in August). Prices are expected to rise further as the Israel-Hamas war threatens Middle East stability. 

U.S. rig count. The back-to-back increases in crude prices did nothing to lift U.S. drilling activity, with the rig count dropping 16 in September, down to 631 after losing 25 rigs in August (647). The general decline in activity was led by Louisiana, down four to 42, with North Dakota losing three rigs to 31. In Texas, a three-rig loss was reported in RRC District 1, dipping to 26, while a two-rig regression occurred in District 6 (27). The losses were offset by three-rig increases in District 7C (24) and District 2 (20).  

U.S. oil production reached an all-time of 13.1 MMbopd in September 2023, despite a September y-o-y decline of 131 rigs (762 in September 2022). According to major operators present at SPE ATCE held in October, the inverse correlation documents increased efficiency in U.S. shale operations. 

U.S. natural gas prices remained depressed in September, as surging oil production in U.S. shale fields continued to flood the market with casinghead gas. However, prices recovered slightly with the commodity at Henry Hub trading at $2.64/MMBtu in September, compared to $2.58/MMbtu in August. There is also optimism that prices will continue to increase as new U.S. LNG exporting facilities come on-line.   

Drilled but uncompleted. The y-o-y reduction in U.S. drilling activity is starting to have a positive impact on the DUC tally. In September 2023, there were 4,681 DUCs in the U.S., 57 less than reported in August 2023 (4,735). In recent months, the build in the DUC inventory has moderated, with three of the seven regions showing y-o-y declines. The Eagle Ford, Permian and Bakken experienced y-o-y declines of -30%, -24% and -6% in their DUC inventories, respectively. However, year-over-year gains were logged In the Niobrara region, where DUCs are up to 777 (+106%), Appalachia reported 746 (+35%), while the  Haynesville region has 737 (+41%). 

International rig count. Similar to the last several months, drilling activity outside the U.S. remained relatively stable. In August, the international rig count averaged 1,141, just six rigs less than the 1,147 working in July. The Canadian count was up three rigs to average 189 in August, as summer heat continued to harden lease roads, which supported elevated onshore activity. Notable gains were also reported in Colombia, up six-rigs to 30, while Abu Dhabi enjoyed a five-rig jump to average 56 in August.   

About the Authors

Craig Fleming

World Oil

Craig Fleming Craig.Fleming@WorldOil.com